Mortgage Bailout Now Profitable For Taxpayers

February 21, 2014

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Fannie Mae and Freddie Mac
have repaid all of the $187 billion they received in the 2008 mortgage bailout during
the financial crisis. Fannie Mae reported Friday it will pay Treasury an
additional $7 billion in profit from the end of last year to complete the
payback.

Beginning in late 2008, the
federal government bailed out the two firms that had become nearly the only
source of loans for American home owners. With the payment announced Friday,
the payments from the two firms now comes to $192 billion.

Fannie's fourth-quarter profit caps its most profitable
year on record, earning $84 billion during 2013. A combination of a housing
market recovery, with a drop in foreclosures, rising home prices and a rebound
in home sales all helped to improve the company's bottom line.

The bursting of the housing bubble in 2006 and
the jump in foreclosures that followed caused massive losses for Fannie and
Freddie, each of which buys home loans from lenders, bundles them up, and sells
them to investors with a guarantee the loans will be repaid.

Through 2012, they were
each paying the U.S. Treasury a dividend. Starting in 2013, the government
started essentially collecting all of each firm's profits. The payments to
taxpayers are treated as dividends and will continue for now.

The only things that could
stop the payments would be a new housing downturn that plunges Fannie and
Freddie back into red ink; passage of one of the legislative proposals to phase
out the two firms; or a successful legal challenge to the current payment
system.

Freddie has already made
dividend payments essentially matching the $71.3 billion it received in the
bailout. It is due to report results next week, and is expected to post
additional profit and payments to Treasury.